Cowen defends economic record in Dáil debate


The Taoiseach has today defended his handling of the economy during a debate on the reports published recently by the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD).

Outlining his strategy to tackle the economic crisis, Mr Cowen said the Government had set out a pathway for reducing the deficit below 3 per cent of GDP by 2013, "striking a balance between sustaining economic activity in the short-term and making a credible start on the difficult adjustment required."

"The IMF have supported this approach, he added.

Referring to Nama, Mr Cowen told the Dáil: "The IMF supports the establishment of Nama which they describe, and again, I quote, as 'pivotal to the orderly restructuring of the financial sector and limiting long-term damage to the economy'.

"Some people seem to support the wholesale nationalisation of the State guaranteed banks and it has been suggested that the IMF favours nationalisation. This is not the case – they see it as possibly necessary in certain situations," he said.

"Nationalisation of the whole Irish banking system is not the panacea that "some suggest. It will not by itself address any of the problems faced by the banks – and no country is adopting a policy of wholesale bank nationalisation.

"The Opposition has claimed many times that no independent economist supports the Government’s approach to the banks. The IMF is independent, and more expert in advising on banking problems than most commentators, and it supports our approach."

The Taoiseach told the Dáil: "This week’s Live Register figures show the scale of the challenge, and the best pathway to sustained job creation and economic growth is to regain competitive advantage in the market place by doing whatever is necessary to retain and regain market share in an environment of depleted demand."

Noting that both the IMF and OECD had warned of a possible overheating in the housing market, Mr Cowen said that, as minister for finance, he had moved to end the tax incentives that then existed for the property market.

"Most importantly, despite a concerted attempt in the media and on Opposition benches, I refused to get rid of stamp duty - the largest transactions tax on property in the EU. If we had heeded those calls to remove stamp duty, the brakes would have been off entirely and we would be in far greater trouble than we are now," Mr Cowen said.

"What all this goes to show is that none of us were right in what we thought would happen."

The Taoiseach went on to say: "My regret is that I did not manage to predict that such a seismic shock to the world economy was going to happen and neither did anyone else. If my crystal ball had been better than those of the IMF, OECD and ESRI, I would have done more to reduce spending so it would have been easier to deal with this international recession.

"However, I stand over the decisions I made based on the best information and advice that I had."

Concluding his address, the Taoiseach said: "The Irish people will not thank us for wasting time and energy wishing things had turned out differently. We owe it to them to concentrate on dealing with the world as we find it – and making the right decisions now."

Irish banks face losses of €35 billion to the end of 2010, the economy will shrink by 13.5 per cent from 2008 to 2010 and unemployment will climb to 15.5 per cent next year, according to the bleak assessment from the IMF.

The global financial watchdog’s annual report on Ireland predicted only a “modestly-paced recovery” after further contraction next year.

The fund calls for further cuts in public sector pay and employment, and a shift away from universal social welfare benefits towards assistance targeted at the most vulnerable.

The OECD has also made a relatively pessimistic forecast for the Irish economy in its June economic outlook. The body said it expects the State's economic output to fall by 9.8 per cent this year compared to a decline of 7.7 per cent predicted by the Minister for Finance Brian Lenihan in the April supplementary budget.